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Morrisey & Brown, Limited, of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian
Morrisey & Brown, Limited, of Sydney is a merchandising company that is the sole distributor of a product that is increasing in popularity among Australian consumers. The company's income statements for the three most recent months follow: Morrisey & Brown, Limited Income Statements For the Three Months Ended September 30 July August Sales in units 6, 750 7,250 Sales $ 742,500 $ 797,500 Cost of goods sold 445,500 478,500 Gross margin 297,000 319,000 Selling and administrative expenses : Advertising expense 33,800 33,800 Shipping expense 69,500 73,700 Salaries and commissions 125,000 132,100 Insurance expense 9,900 Depreciation expense 22,100 22,100 Total selling and administrative expenses 260,300 271,600 Net operating income $ 36, 700 $ 47,400 September 7,750 $ 852,500 511,500 341,000 9,900 33,800 77,900 139,200 9,900 22,100 282,900 $ 58,100 Required: 1. By analyzing the data from the company's income statements, classify each of its expenses (including cost of goods sold) as either variable, fixed, or mixed. 2. Using the high-low method, separate each mixed expense into variable and fixed elements. Express the variable and fixed portions of each mixed expense in the form Y = a + bx. 3. Redo the company's income statement at the 7,750-unit level of activity using the contribution format
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